American giant Morgan Stanley has become the latest to weigh in
with its opinion, and its not just focusing on what will happen
to Britain, but also the wider impacts across Europe.

In a note sent on Monday evening, Morgan Stanley analysts led by
Elga Bartsch took an in-depth look at what a Brexit — Britain
leaving the EU — would mean for the rest of Europe. The 43-page
note is loaded with great charts and data about a potential
Brexit. The news, Morgan Stanley says, wouldn't be good.

As part of the"What Brexit Would Mean For Europe"
note, Morgan Stanley identifies four big areas where
the impact of Britain leaving the EU would spill over to the rest
of Europe.

Here's what MS has to say (emphasis ours):

In the event of a Brexit, its implications would reach
well beyond the UK to the rest of Europe. Some countries
look more exposed than others, but the overall
impact would be negative for growth, negative for the euro,
and negative for European equity markets.

In other words, areas of "contagion" which would be a big hit for
the economic and political situation across Europe.

Let's take a look at each one of these areas of impact from the
section of the note named "Brexit Channels of
Contagion."

First up, uncertainty. This is what Morgan
Stanley has to say (again, emphasis ours):

Brexit would open a lengthy period of uncertainty. The initial
equity market reaction would be negative, currency
markets volatile, and investment may take a hit.

Next, trade. Morgan Stanley again:

The trading relationship the UK has with the rest of the EU will
not be as beneficial, as 'free', as it is at present. This, and
the lengthy period of uncertainty around the exit
negotiation will have taken its toll on UK growth and dampened
demand for eurozone goods.

Third, the issue of migration, which has
been one of the hottest topics across the continent in the past
few years. Here's another comment from MS:

Near-term the biggest risk is probably that post-Brexit
migration control policies in the UK help boost the
anti-immigration cause throughout the rest of Europe
especially where some countries are struggling to
accommodate a sharp increase in refugees. That will be especially
the case to the extent that UK migration restrictions are
seen as increasing the inflows elsewhere and because new
UK policies may resonate in the policy debate elsewhere.

The final issue, Morgan Stanley says, is that of
politics. Here's the bank:

Should the UK leave the EU, the fact that someone managed to
change the status quo could potentially galvanise
the protest parties, which may step up their demands.
This can play out through national independence claims and
anti-EU or eurozone movements.

A
woman holds a Union flag umbrella in front of the Big Ben clock
tower (R) and the Houses of Parliament in London October 4,
2014.REUTERS/Luke
MacGregor

All of this sounds pretty dreadful. Trade will suffer, markets
will be racked by uncertainty, political protest parties
will gain traction, and the migration crisis could get even
worse.

However, you probably don't need to worry too much about
this happening though. Morgan Stanley currently predicts there's
just a 35% chance that Britain will vote for Brexit, and even if
the UK does vote to leave on June 23, there are some
upsides, the bank says.

Here's Morgan Stanley one last time:

Some exports that would have come from the UK, portfolio inflows
and FDI destined for the UK, could be re-routed to the rest
of Europe and the relocation of some
financial-services business could boost eurozone economies.
But the latter effect, in particular, seems likely to
work relatively slowly. Longer term, less migration to the
UK may give European, especially some CEEMEA economies, a
population boost, but this effect is likely to be very modest, at
least at first.